Separation and divorce is a time of many changes: Residences may be sold and/or new ones purchased; accounts may be transferred and/or divided or closed; where once there was one primary home, now there are two. The emotional and financial impact of this myriad change can be monumental. Yet there is one more asset that should not be left out of the separation agreement, without tempting severe instability: namely health insurance coverage.
The division of assets, the allocation of support, and the assignment of parenting arrangements correctly occupy center stage in divorce negotiations. After all, these are the areas that keep individuals up at night, and often generate contentious legal battles. Here, we suggest that health insurance also emerges as a primary area to be incorporated in the overall structuring of the parties’ agreement. By law, each spouse and child must be covered by medical insurance, but mandatory or not, the importance of adequate and affordable coverage is of critical importance to the future health and the financial well-being of all family members.
Before the passage of the Affordable Care Act, Massachusetts, as a state, mandated medical insurance coverage. Further, Massachusetts’ law provided that an ex-spouse could continue to be covered under the former spouse’s policy provided the employer was not self-insured. This was, and still is, a major benefit in the Commonwealth.
Although large companies, such as IBM and Microsoft, are often self-insured, many others are not. The access for ex-spouses to employer-assisted coverage, typically at no additional charge to that of their existing policy, provides a major benefit and significant savings to the family.
In all divorce negotiations, access to, and liability for the cost of health insurance coverage after divorce, must be agreed to and specified in the final Separation Agreement.
In families where ex-spouses are eligible to continue to be covered under their former spouse’s policies, questions, which are still to be answered, include:
Determination of liability for insurance: One party? Both parties? Is there an equal division of cost or a proportionate division?
Does liability change over time?
Is liability for a spouse’s coverage different than for a child’s coverage?
Does the payment for health insurance affect the calculation of support by reducing the payor’s income?
What events affect the continuation of the ex-spouse’s coverage? Does liability depend on circumstances that are likely to change (e.g., remarriage of the insured spouse, change of employment)?
When health insurance terminates for one spouse at the time of divorce, how is the cost for coverage factored into the determination of support and/or the allocation of assets?
To a lesser extent, this question also pertains to companies that, while covering an ex-spouse, deem the benefit to be taxable to the insured spouse. How, then, is this cost to be funded?
The shared problem-solving approach of mediation in tackling these issues can prove invaluable.
Mediation provides a collaborative environment conducive to amicably working out issues that pertain to both individuals’ access to health insurance and to the fair apportionment of cost. Agreements pertaining to health coverage must be court ordered, and as such, if omitted from your Agreement, coverage will not be guaranteed regardless of employer policy or the insured employee’s desire to provide extended coverage to his/her former spouse. Health insurance provisions must not be overlooked in the structuring of the terms of your Agreement. It is, and should be, a key area of concern to all divorcing families for its financial impact on, and health benefit to all members of the family.
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